Kenya: Uproar Greets Move to Lease Mumias Sugar Company to Devki Group

Western Kenya politicians have opposed a move by the Kenya Commercial Bank (KCB) to lease out debt-ridden Mumias Sugar Company.

The leaders have protested that there was neither public participation nor were key players consulted before the lease was executed.

The bank placed the miller under receivership after it defaulted on loans amounting to Sh500 million.

The tender, which attracted eight firms, was won by Devki Group - a steel and cement manufacturing conglomerate.

Those opposed to the leasing of the firm argue Devki Group has no experience in sugar milling.

The bank had appointed Ponangipalli Venkata Ramana Rao as the company's receiver-manager to protect its assets and recover its loans.

Read: Lease cancellation thwarts strategy to save ailing Mumias

In September 2019, the bank wrote to the receiver-manager asking him to explore all means and recover unpaid dues.

Outstanding debts

The matter surfaced in the Senate, where Kakamega Senator Cleophas Malala challenged the government to provide details of the lease.

In his statement, the senator pointed out that the purported deal did not explain who would clear the company's outstanding debts, workers' arrears and billions owed to sugar-cane farmers.

The senator challenged the government to produce details of the correspondence on which the decision to lease the company was based, arguing the law might have been violated in the process.

Mr Malala's request followed a similar demand by Nominated MP Godfrey Osotsi, who had in a letter to Speaker Justin Muturi demanded an explanation as to whether the government, the County Government of Kakamega, shareholders and the Nairobi Stock Exchange were involved, considering the government has a 20 per cent shareholding in the sugar firm.

"Devki Group, which has no experience in the sugar industry, has actively lobbied to win the leasing tender in direct violation of the Public Procurement and Disposal Act," Mr Osotsi said in the letter in which he further demanded that KCB directors and the government be invited to Parliament to shed light on the leasing process.

The MP expressed fears that Devki Group was only interested in exploiting scrap metal resources, land and other prime properties and had no intention of helping the miller get back on its feet.

Relevant legal instruments

Mr Malala now wants the Ministry of Agriculture to explain the procedure followed by the government to sell its stake in Mumias Sugar Company as well as the bidding process.

He further wants the ministry to reveal the identities of the other bidders, when the tendering was done and whether evaluation of the bids was done and the criteria used.

"We want to know whether the relevant legal instruments on the leasing of public utilities were adhered to," Mr Malala said.

The company has remained in the doldrums even after President Uhuru Kenyatta announced a Sh2 billion bailout package, which was reportedly channelled between 2015 and 2017.

Bungoma Senator Moses Wetang'ula argued that the Privatisation Commission should have looked into all the issues afflicting the miller and prepared a report that should have been tabled in Parliament before the lease was executed.

"Will the new investor compensate farmers in Kakamega and Bungoma who for years have relied on the miller for their livelihoods?" he posed, demanding an explanation from the government on who would account for the Sh2 billion bailout package.

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